Everyone wants to save money on taxes, and one of the best ways to do so as a commercial real estate owner is to take advantage of important deductions and other tax strategies that will make next year’s tax season less stressful.
Whether you are a new commercial real estate owner or an experienced taxpayer that needs a little help saving money on annual taxes, here is some free advice from Dallas property tax consultants that could help you year in and year out.
Understand When to Deduct Certain Renovation Costs
Renovations and repairs are often actions that property owners take for granted and believe they can willingly deduct year after year. Unfortunately, certain renovation costs are deductible at certain points in time, and your best bet is to consult with a property tax specialist before deducting repairs and renovations.
As an example of the tax complication involved, it’s very easy for a renovation or repair to be deemed an improvement, which would result in a different tax treatment that goes beyond a standard deduction.
Remember to Deduct Investment Property Tax
Remember, as a commercial real estate investor, you have the right to deduct up to $80,000 in property taxes you’ve paid to the state on your federal tax return.
The previous limit was $10,000 but was increased between 2021 and 2030. After 2030, though, the deduction cap returns to the $10,000 limit.
Every year, take advantage of your property’s depreciation. Claiming your property’s depreciation allows you to deduct the cost of your taxes paid to buy and improve your real estate rental property over its lifetime.
Residential property is depreciated over 27.5 years while commercial property is depreciated over 39 years.
Why is it important to claim the depreciation of your property over the years? Simply put, doing this reduces the amount of taxes owed for your rental properties.
Take Advantage of Passive Losses Where You Can
Real estate passive activity loss is extremely common in rental properties. In most cases, passive activity loss isn’t something an owner can deduct from their taxes. However, if your modified adjusted gross income (MAGI) is $100,000 or less, you can deduct up to $25,000 of passive income against your standard income.
Keep in mind that the deduction gradually phases out until it is no longer eligible for a deduction at $150,000.
Cover Your Real Estate Tax Concerns With The Hegwood Group
If you are a commercial property owner that needs help handling property taxes or navigating tax season in general, the Hegwood Group is ready to help. We are a team of experienced real estate property tax consultants that can deliver on our promise of addressing your tax concerns and helping you save money off of your real estate taxes.
Contact us today to learn more about our services and schedule your free consultation with a member of our firm.